Ed Palattella: RCWE's troubles live on in bankruptcy

An ambitious plan to buy an Erie office building and fund job-training programs fell apart four years ago. A new bankruptcy filing revisits the collapse.

Scrutiny of the RCWE is back.

A Chapter 11 filing in U.S. Bankruptcy Court in Erie a week ago returned attention to the Regional Center for Workforce Excellence, the now-defunct nonprofit that once managed publicly funded job-training programs in northwestern Pennsylvania.

The RCWE's fortunes unraveled in 2013, when it was fired in light of a state audit. But the aftermath of the RCWE's collapse has lingered, with ramifications for the region's six counties, including Erie County.

The collapse can be traced to one event: the decision to buy a building — a property owned by the RCWE Holding Co., which filed for bankruptcy on June 12.

Through the holding company, the RCWE about eight years ago spent millions of dollars to purchase and renovate the Sumner E. Nichols Building at West Eighth and Sassafras streets. The RCWE turned the property into the RCWE Building and hoped to use surplus rental income to help boost job-training programs that had suffered federal and state funding cuts.

The arrangement never made enough money to subsidize the job-training programs. And state auditors in 2013 found that the RCWE improperly used public funds on the building.

The state also determined that the six member counties that the RCWE served — Erie, Crawford, Clarion, Forest, Venango and Warren — had to repay that money. The counties sued the RCWE Holding Co. to recover more than $475,000.

Which leads back to the RCWE Holding Co.'s bankruptcy. Court records show the RCWE Building is financially underwater, and that selling it is the only way to pay the holding company's secured creditors, including First National Bank, which is owed $1.2 million. The counties' $475,000 claim is unsecured and likely to go unpaid in the bankruptcy. Not enough money will be available.

The RCWE Building is expected to sell for $1 million to $1.2 million, the RCWE Holding Co.'s bankruptcy lawyer, Guy Fustine, said in court on Thursday. Fustine is a member of the Erie-based Knox law firm, which advised the RCWE when it created the RCWE Holding Co. years ago.

Reflecting on the reasons for the bankruptcy, Fustine said in court: "In retrospect, it was probably a bad decision to buy that building."